Early SOFR/Treasury Option Roundup: Put Buying, Rate Cuts Consolidate

Mixed overnight trade sequed to downside put structures, unwinding calls as underlying futures trade weaker after NY Fed Williams pushed back on market pricing rate cuts in 2024. Projected rate cuts for early 2024 continue to consolidate: January 2024 cumulative -3bp at 5.302%, March 2024 chance of rate cut -65.8% vs. 76.5% earlier (-81.9% late Thursday) w/ cumulative of -19.5bp at 5.138%, May 2024 chances -82.9% vs. -92.3% earlier with cumulative -44.02bp at 4.931%, while June'24 climbs toslips to -92.7% vs. -99.2%, cumulative -63.4bp at 4.699%. Fed terminal at 5.335% in Feb'24.

• SOFR Options: (Dec options expire today)
  • Update, +40,000 SFRH4 94.62/94.68 put spds, 1.0
  • -15,000 SFRF4 94.87/95.00/95.06 broken call flys, 3.5
  • over 7,500 SFRM4 95.25 puts, mostly 24.5ref 95.325
  • Block/update, total 7,500 SFRH4 94.93/95.06/95.18 call flys, 3.75
  • Block, 5,000 SFRM4 95.75/96.00 call spds, 4.5 vs. 95.37/0.10%
  • 3,500 SFRM4 95.00/96.00 2x3 call spds ref 95.405
  • 3,000 SFRU4 95.00/95.25/95.50/95.75 put condors ref 95.825
  • 5,000 SFRH4 94.62/94.75 put spds ref 94.925
  • 4,000 2QZ4 96.75/98.00 call spds vs. 2QZ4 97.25/98.00 call spd
  • 2,400 SFRZ3 94.62 calls, cab ref 94.6275
  • 5,100 0QZ3 96.00 puts, 2.0 ref 96.115
• Treasury Options:
  • -5,000 wk3 TY 112 puts, 4 vs. 112-08
  • 2,000 TYF4 111.5/112/112.5 put flys, 10 ref 112-18.5
  • 1,000 FVF4 108/109.5 call spds vs. 2,000 FVG4 110/111.5 call spds ref 108-18.25
  • 1,500 TYF4 111/112 call spds ref 112-09
  • 2,400 TYF4 111.25 puts, 5 ref 112-15.5